On 30 March 2023, the UK Government published its Economic Crime Plan for 2023 – 2026 (the Plan), which sets out a number of measures intended to enhance the UK’s regulatory framework and strengthen its response to the threat of economic crime. The Plan makes clear the Government’s intention to rely increasingly on the private sector as a first line of defence to prevent and detect economic crime. As a result, companies will need to ensure that they are complying with emerging legal standards in relation to economic crime and making preparations for the updates expected in coming years.
The 2023 Plan builds on the goals set out in the first Economic Crime Plan for 2019 – 2022 (the 2019 Plan), and focuses on three key outcomes:
- reducing money laundering and recovering more criminal assets;
- combatting kleptocracy and driving down sanctions evasion; and
- cutting fraud.
Whilst there have been a number of developments in the UK’s regulatory landscape since the 2019 Plan (for example the introduction of key legislation reforming Companies House (see our article here) and the proposed introduction of a failure to prevent fraud offence (see our article here), the main themes and goals in the Plan remain almost identical to those set out in the 2019 Plan.
One of the key themes in both plans is the need for consistent collaboration between the public and private sectors, with the latter described by the Government as the “first line of defence” in combatting economic crime. The need for close collaboration and the increased burden on companies is demonstrated throughout the Plan, in information sharing requirements such as proposed enhancements to the Suspicious Activity Report (SARs) regime; the proposed introduction of the failure to prevent fraud offence for companies; the confirmation of proposed reform of the identification doctrine; and the increased responsibilities being given to company service providers and other private entities to identify money laundering or fraudulent schemes.
The Plan sets out in detail a number of new programmes, regulatory bodies and task forces which the Government intends to implement in order to achieve the key outcomes, including (a) the new Anti-Money Laundering and Asset Recovery Programme, which will be created to build capacity across the UK’s regulatory framework in hopes of increasing information sharing and investigative capabilities; (b) the establishment of the National Crime Agency (NCA) Combating Kleptocracy Cell and tapping into international resource through the UK’s involvement in international task forces; and (c) increased UK Financial Intelligence Unit resource, with more staff dedicated to money laundering.
While inclusion of the above information is useful and indicates the UK’s commitment to combating financial crime, the Plan, as with the 2019 Plan, is light on the detail of how these new bodies and programmes will be resourced and funded.
Reducing money laundering and increasing the recovery of criminal assets
Despite major legislative reform in recent years, the NCA estimates that up to £100 billion is laundered through the UK or UK-registered companies each year. Whilst the UK has made continued efforts to crack down on money laundering, the Plan refers to the need to strengthen further the UK’s response by creating what it describes as an “end-to-end response” and furthering collaboration between the public and private sectors; this was also one of the key themes of the 2019 Plan.
Among others, the Plan sets out the following actions to reduce money laundering and increase recovery of criminal assets:
- the enactment of legislation to underpin the reforms to Companies House. The reforms proposed will in particular seek to limit the potential for abuse of corporate structures by, among other things, empowering the Registrar to challenge suspicious appointments and filings, reject certain registrations, and more easily share information with law enforcement and the private sector;
- enhancement of the UK’s anti-money laundering and counter terrorist financing supervisory regime following the UK’s departure from the EU. Proposed developments include greater information sharing between the public and private sector (with authorised company service providers playing a key role) and consultation on broader structural reforms to take place in the coming years;
- introduction of “an ambitious new Anti-Money Laundering and Asset Recovery programme”, with increased capacity for intelligence and investigative capability with the use of updated technology and international cooperation in order to increase the recovery of laundered funds;
- enhancements to the SARs regime by improved intelligence sharing and tracking through the delivery of a new SARs database, as well as bulk reporting options to ease the burden on reporters;
- renewed focus on law enforcement’s capacity to pursue and prosecute the use of cryptoassets to conduct money laundering by increasing regulation of crypto, whilst making the UK an attractive destination for cryptoassets and cryptoasset innovation (see our article here on recent proposals).
Companies should keep up to date on any further changes to the SARs regime and acquaint themselves with any new processes for reporting any suspected fraud or other financial crime. Additionally, companies with exposure to cryptocurrency or cryptoassets should familiarise themselves with the associated risks of financial crime in this space.
Combatting kleptocracy and driving down sanctions evasion
The Plan emphasises the importance of the UK addressing kleptocracy, including through sanctions. The Plan includes: (a) additional resource being provided to the Office of Financial Sanctions; (b) the FCA’s increased supervisory focus on assessing financial services firms’ sanctions controls; and (c) the creation of the NCA’s Combatting Kleptocracy Cell.
More generally, reforms to Companies House and the increased collaboration between the private and public sector aim to combat sanctions evasion and kleptocrats laundering money.
Companies should ensure they have adequate sanctions policies and controls in place to satisfy requirements in this space and that they are sufficiently resourced to deal with the regular updates and developments.
It is no surprise that the Plan has made reducing fraud a key focus area, setting out a fraud strategy aimed at preventing fraud, pursuing fraudsters, and empowering corporates and individuals to recognise, avoid and report fraud.
The introduction of the proposed failure to prevent fraud offence in the Bill will be the most significant development in this area in the coming years and will to some extent shift the responsibility for fraud prevention from victims and onto companies; this is in line with the approach taken by the government in last year’s announcement that legislation will be introduced to require payment service providers to reimburse the victims of authorised push payment scams). The Plan indicates that the UK Government intends to implement the Bill in the second quarter of 2023.
In addition, the Plan has indicated that the UK is committed to broader corporate criminal liability reforms and indicated that the UK will be introducing legislation on the identification doctrine to make it easier to attribute liability to large companies for fraud and other criminal offences.
Companies should review their fraud risk assessments and take steps to evaluate whether they have adequate anti-fraud policies and procedures in place which will allow them to be in compliance with the new proposed failure to prevent fraud offence. See our article on the steps companies should be taking now here.
The Plan sets out an increased onus on businesses to act as the first line of defence in the fight against economic crime, with a greater burden being placed on the private sector to have in place appropriately robust anti-economic crime policies and procedures. We can expect this trend to continue with the government seeking to share the burden of information gathering and crime prevention with the private sector. In preparation, it is vital for businesses to pay close attention to their enhanced obligations.